USD

The dollar dropped back to near multi-month lows yesterday. This followed a brief bounce on Wednesday caused by the release of US Federal Reserve meeting minutes which suggested tapering government bond purchases if the pandemic recovery continued. 

Now it seems the market has judged the Fed will take its time to taper, needing to see sustained positive data first to do so. 

US jobless also claims dropped by 34,000 to 444,000. Although positive, the number is still well above the level of claims from before the pandemic. This may reinforce the idea that it will still be months before the Fed seriously considers tapering.

EUR

The euro could see some volatility this morning following successive releases of Market’s flash PMIs from France, Germany, and the UK. 

Things have generally been improving in Europe. Most countries are beginning to lift restrictions and reopening their economies. However, there is still a slight concern around the new Indian variant. 

The vaccination program also appears to be finally ramping up, with France and Germany ahead of schedule with their inoculation targets. If that continues it can only be good news for the euro. 

GBP

UK Market PMIs are released today. Expect services PMI to advance further into expansion at 62.0 compared to 61.0 prior. Once again manufacturing PMI is projected to fall slightly to 60.0 from 60.9 in April.

Retail sales already released were comfortably above expectations with a strong reading of 9.2% against the forecast of 4.5%. This should see the pound well supported, with today’s PMIs giving us more of an idea of whether the UK recovery is taking hold.

Key announcements

08:30 – GBP – UK retail sales
Forecast 4.5% actual 9.2%
08:30 – EUR – French flash service PMI 
08:30 – EUR – German flash service PMI
08:30 -EUR- German flash manufacturing PMI 
09:00 – EUR– UK Flash manufacturing
09:00 – GBP– UK Flash services PMI